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UPDATE: Nyota feeder zone adds to potential of Ethiopia project

Ocean Equities said this could be a game changer for the proposed mine.
UPDATE: Nyota feeder zone adds to potential of Ethiopia project

---Adds broker comments---

Nyota Minerals (LON:NYO) has assigned what it calls an ‘in-house’ inferred resource estimate of 1.1mln ounces of gold to the feeder zone to its Tulu Kapi project in Ethiopia.

The company estimates the additional resource has the capacity to add between 15,000 and 45,000 ounces a year to production.

Ocean Equities said this could be a game changer for the proposed mine, because it would allow Nyota to significantly improve the head grade, from 1.85 grams per tonne (g/t) gold, by supplementing open pit ore with higher grade ore from the feeder zone.

“Increasing gold production capacity would make Tulu Kapi a low cost gold producer,” said analyst Christopher Welch.

Elsewhere, fellow City broker Investec said that although the initial underground resource is relatively small, it is a significant positive as it is likely to improve the economics of the overall project.

In December, a definitive feasibility study suggested Tulu Kapi’s annual output could be in the order of 105,000 ounces a year, though at that point a contribution from the feeder zone had not been incorporated into those estimates.

The latest figures were released along with the final results from the feeder zone drilling programme started last September.

This revealed high grade intercept, including 9.45 metres at 15.04 grams per tonne of the precious metal, almost 14 metres at 10.55 grams and 12.25 metres at 5.34 grams.

The feeder zone is open down-plunge in a north-northeast direction and crops out in the proposed open pit at the south-west extension.

Richard Chase, Nyota’s chief executive, said: "This is a very significant step forward for Nyota as we advance towards our goal of becoming a gold producer.”

Separately, Nyota said it is confident of securing interim finance as it faces a working capital shortfall this quarter based on previously agreed budgets.

Spending on the feeder zone drilling and delays to the issue of a large scale mining licence are responsible for the squeeze, Nyota said. As at the end of last year it had A$3mln in the bank. It said cost cuts will be introduced immediately.

December’s DFS pointed to gold production of 924,000 ounces over an estimated ten year life. This equated to gross revenues of US$1.4 billion and net undiscounted pre-tax, post-royalty cash flow of US$421mln based on a gold price of US$1,500 per ounce of gold.

"Importantly the DFS does not include the deeper high grade feeder zone or the multiple gold targets identified in the proximity of Tulu Kapi, all of which have the capacity to markedly improve the project economics,” said CEO chase.

"The project can now be fast-tracked towards commercial production in 2015 pending the receipt of our mining licence and securing the required project finance.

“Hence our focus is on completing negotiations with the Government of Ethiopia to enable this to happen."


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February 05 2014

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